China Headwinds Get in Way of Dell’s Ambitions

Microsoft declares quarterly dividend

Dell Technologies (DELL) has big dreams to continue growing its sales and generating profits, which it could use to reinvest in driving more growth and rewarding shareholders through dividend payments and share repurchases, as its information technology peers such as Microsoft (MSFT) have been doing. Microsoft announced recently that it will pay its shareholders a quarterly dividend of $0.46 per share on August 15.

China Headwinds Get in Way of Dell’s Ambitions

Although Dell has big ambitions to put more money back in the pockets of its shareholders, the company has run into some headwinds that could slow down its progress and delay gains that some investors may be expecting. Last month, Dell’s chief financial officer Tom Sweet described the server market in China as tough in an interview with Bloomberg. The comment came after Dell reported first-quarter results for fiscal 2020, which showed revenue came in at $21.9 billion, missing consensus estimate at $22.3 billion. Revenue from the company’s server and networking business fell 9.0% year-over-year to $4.2 billion in the quarter, the first decline in many quarters.

US-China trade war puts Dell in a bind

Besides Chinese companies’ slowing purchase of servers amid the trade war and impacting demand for Dell’s products in the country, the trade war has also put Dell in a bind in a different way. According to a report by the Wall Street Journal, China has warned technology companies including Dell, Intel (INTC), Cisco Systems (CSCO), and Qualcomm (QCOM) of consequences if they cut off Huawei from the components and services they provide.

While heeding China’s warning could help Dell protect its business interests in the country, it could also expose the company to punishment in America.